Look to Stable Giants Like GE Stock

By Gaurav S. Iyer, IFC Published : September 2, 2016

Forget the flashy young tech startups plastered across today’s headlines; established titans like General Electric Company (NYSE:GE) can actually outperform the market more consistently. So if you want wealth for your golden years, look to GE stock.

The market is biased towards obscurity. Every investor wants to unearth a stock on the verge of greatness, not one that is a household name. It’s so tempting to have the inside scoop on the next big stock that investors sometimes fail to do their homework.

General Electric stock may feel outdated and irrelevant to the modern investor, but the reality is just the opposite. The market is entering a period of consolidation, which is a good sign for cash-rich juggernauts like GE stock.

What’s important to understand is that General Electric is a shark with an appetite. It gobbles up tiny startups with interesting technology, simply because it can. For instance, GE just bought ShipXpress Inc., a cloud-based software provider that specializes in supply-chain solutions for railroad customers. (Source: “GE Buys Software Company to Bolster Rail-Industry Supply Chain,” Bloomberg, August 30, 2016.)

Let me say that again for emphasis: supply-chain solutions for railroad customers.

It’s a weirdly specific product that appeals only to niche clients, but that’s what makes General Electric special. The company has tendrils extending into every corner of the business world, giving them a unique ability to cross-sell useful products.

The company also has extremely deep pockets. With $52.1 billion in cash and short-term equivalents, and a market cap of $280.0 billion, GE stock has the resources to buy its way into the future, if nothing else. But don’t take my word for it; the proof is in the pudding.

In its most recent quarter, General Electric brought in $33.5-billion-worth of revenue, up by 14.6% year-over-year. The firm’s bottom line was even better for anyone with a long position on GE stock. It raked in $2.9 billion of profit in the three months ended June 30, compared to $1.4-billion net loss last year.

Put another way, General Electric stock is far from dead.

Looking Ahead for GE Stock

The company has been at the forefront of technology and innovation for decades, delivering industrial components, products, and software beyond count. GE stock is one of those perfect assets because the company underneath is indispensable to the world.

How would manufacturers function without General Electric’s industrial parts, or airplane manufacturers without GE engines? “GE Capital,” “GE Digital,” and more. All of these subdivisions are vital arteries in the anatomy of global commerce, making General Electric a difficult company to challenge.

That being said, I started to worry in recent years. There were tectonic shifts in the technology sector, from cloud computing to artificial intelligence (AI). The shifting landscape was throwing off the balance of power for giants like GE, so the firm took action.

GE signed a partnership agreement with Microsoft Corporation (NASDAQ:MSFT), whereby GE’s industrial software would be delivered via the “Azure” cloud computing platform. And, as I said above, GE stockholders have been footing the bill for a ton of acquisitions.

That’s what you do with profits. You pay some out to shareholders, and you expand the business. General Electric’s management seems to have noticed that fewer tech firms are starting to go public these days, so it’s taking advantage of that slowdown.

It is giving promising tech startups another route to fame and fortune.

As for the whole returning capital to shareholders thing, well, GE has that part written into its DNA. General Electric stock has paid a regular dividend every quarter since 1899.

Any way you slice it, this is an unbelievably good stock, which has returned billions of dollars to shareholders. But if you’re looking for something more exciting, with a little more upside and a little more risk, then take a look at our Free Exclusive Report. Our expert team of tech analysts have compiled a proprietary list of “Big Tech Stocks Poised for More Growth.”